Amazon.com Announces Second Quarter Sales up 23% to $19.34 Billion

SEATTLE--(BUSINESS WIRE)--Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for its
second quarter ended June 30, 2014.

Operating cash flow increased 18% to $5.33 billion for the trailing
twelve months, compared with $4.53 billion for the trailing twelve
months ended June 30, 2013. Free cash flow increased to $1.04 billion
for the trailing twelve months, compared with $265 million for the
trailing twelve months ended June 30, 2013. Free cash flow for the
trailing twelve months ended June 30, 2013, includes cash outflows for
purchases of corporate office space and property in Seattle, Washington,
of $1.4 billion.

Common shares outstanding plus shares underlying stock-based awards
totaled 480 million on June 30, 2014, compared with 474 million one year
ago.

Net sales increased 23% to $19.34 billion in the second quarter,
compared with $15.70 billion in second quarter 2013. Excluding the $237
million favorable impact from year-over-year changes in foreign exchange
rates throughout the quarter, net sales grew 22% compared with second
quarter 2013.

Operating loss was $15 million in the second quarter, compared with
operating income of $79 million in second quarter 2013. The favorable
impact from year-over-year changes in foreign exchange rates throughout
the quarter on operating loss was $31 million.

Net loss was $126 million in the second quarter, or $0.27 per diluted
share, compared with net loss of $7 million, or $0.02 per diluted share,
in second quarter 2013.

“We continue working hard on making the Amazon customer experience
better and better,” said Jeff Bezos, founder and CEO of Amazon.com.
“We’ve recently introduced Sunday delivery coverage to 25% of the U.S.
population, launched European cross-border Two-Day Delivery for Prime,
launched Prime Music with over one million songs, created three original
kids TV series, added world-class parental controls to Fire TV with
FreeTime, and launched Kindle Unlimited, an eBook subscription service.
For our AWS customers we launched Amazon Zocalo, T2 instances, an
SSD-backed EBS volume, Amazon Cognito, Amazon Mobile Analytics, and the
AWS Mobile SDK, and we substantially reduced prices. And today customers
all over the U.S. will begin receiving their new Fire phones — including
Firefly, Dynamic Perspective, and one full year of Prime — we can’t wait
to get them in customers’ hands.”

Highlights

Amazon introduced Fire phone, offering instant access to Amazon’s vast
content ecosystem and exclusive features like the Mayday button, ASAP,
Second Screen, X-Ray, Dynamic Perspective, Firefly, free unlimited
photo storage, and more. Fire phone ships today and is available
exclusively on AT&T — the nation’s most reliable 4G LTE network.
Customers can order at www.amazon.com/Fire-phone, www.att.com, and
in AT&T retail locations nationwide. Fire phone with 32GB is available
for $199 with a two-year contract or zero down and $27.09 a month with
AT&T Next 18.

Fire phone is the only smartphone with Dynamic Perspective and
Firefly. Dynamic Perspective uses a new sensor system to respond to
the way customers hold, view, and move Fire phone, enabling
experiences not possible on other smartphones. Firefly quickly
recognizes things in the real world — web and email addresses, phone
numbers, QR and bar codes, movies, music, and millions of products,
and lets users take action in seconds — all with the simple press of
the Firefly button.

Amazon launched the Dynamic Perspective SDK and the Firefly SDK. The
Dynamic Perspective SDK gives developers access to algorithms that
identify the X, Y, and Z coordinates of the user’s head, enabling a
whole new class of apps and games. The Firefly SDK allows developers
to extend the use of the Firefly button to enable new actions for
customers.

Amazon announced that Amazon Appstore selection has nearly tripled
over the past year and developers continue to report strong
monetization from the apps they offer in the store. Since Fire phone
launched, the rate of app submissions to the Amazon Appstore has more
than doubled as developers have already begun finding innovative uses
of the phone’s enhanced carousel, Dynamic Perspective, and Firefly.

Amazon Game Studios announced two new games — Saber’s Edge and
To-Fu Fury — created exclusively for Amazon’s new Fire phone. Saber’s
Edge and To-Fu Fury are co-developed with partners,
Hibernum and HotGen as part of Amazon Game Studios’ mission to build
fun, immersive games from the ground up for Amazon devices.

Amazon FreeTime is now available on Fire TV, bringing revolutionary
parental controls that are simple and easy to use. FreeTime gives kids
an experience designed just for them, with character search and
content all their own. It gives parents peace of mind and control,
enabling them to explicitly pick what content is available in FreeTime
and set time limits by content type. FreeTime Unlimited brings
thousands of apps, games, movies, and TV shows, and removes in-app
purchasing and ads.

Fire TV sales have significantly exceeded our sales forecast and we
are working hard to increase our manufacturing output. Fire TV app
selection has more than doubled since launch due to strong engagement
from developers. Recent additions include MLB TV Premium, WWE
Network, Animal Planet Live, and Grand Theft Auto.

Amazon introduced Prime Music, a new service that offers Prime members
unlimited, ad-free access to over a million songs at no additional
cost to their membership. In the week following its introduction,
Prime members streamed tens of millions of songs — that’s millions of
hours of music — and added tens of millions of songs and more than a
million Prime Playlists to their music libraries, for free.

Amazon Studios introduced Amazon’s first two original children’s
series: Tumble Leaf and Creative Galaxy, exclusively to
Prime Instant Video, and will add a third, Annedroids,
tomorrow. The first six episodes of each show are available this
summer, with additional episodes to follow later this year. In
addition, Amazon Studios has greenlit five additional new pilots — the
dramatic thriller Hysteria, dramatic comedy Really, one
hour drama Hand of God, and comedies The Cosmopolitans
and Red Oaks — as part of its third pilot season debuting next
month on Amazon Instant Video.

Amazon expanded Whispersync for Voice to include Kindle reading apps
for iOS and Android, providing a seamless listening experience for
Audible content right inside the Kindle app. Users can switch
instantly between reading a Kindle book and listening to the companion
audiobook from Audible — all with just one tap, without leaving the
book.

Amazon introduced Kindle Unlimited — a new subscription service which
allows customers to freely read as much as they want from over 600,000
Kindle books, and listen as much as they want to thousands of Audible
audiobooks, all for only $9.99 a month. Finding a great book is easy,
and there are never any due dates — just look for the Kindle Unlimited
logo on eligible titles and click “Read for Free.” Customers can
choose from best sellers like The Hunger Games, Diary of a
Wimpy Kid, and The Lord of the Rings.

More customers are using the Shop by Vehicle feature in the Amazon
Automotive store than ever before. Over one million customers added
their car, truck, or motorcycle to their Amazon Garage during the
quarter to find products specifically designed to fit their vehicle,
bringing the total count of active customers with a vehicle in the
Amazon Garage to over 14 million.

AmazonFresh continued to expand its service in the Los Angeles and San
Francisco areas. AmazonFresh customers in Orange County, Berkeley,
Oakland, and Silicon Valley now get same-day and early next-day
delivery of fresh groceries as well as over 500,000 Amazon.com items.

Amazon has expanded Sunday delivery to 18 additional cities since
launching in the Los Angeles and New York metro areas. Since Sunday
delivery launched, millions of packages have been delivered on Sundays
to Amazon customers. Amazon Prime members, who receive unlimited
two-day shipping on millions of items, can order as late as Friday and
receive their packages on Sunday, for free.

Amazon announced enhancements to its European cross border delivery
network. Amazon.co.uk and Amazon.de Prime members now have access to
free Two-Day Delivery for approximately one million additional
products stored in Amazon’s European fulfillment centers located
outside their respective countries.

Since launching the India marketplace website, Amazon.in, one year
ago, Amazon has rapidly expanded selection to serve customers in
India, averaging a launch of one new category every 13 days. With
Amazon.in customers can shop from India’s largest store with ease and
confidence from over 17 million products from a rapidly growing group
of small and medium businesses.

The AWS team grew by thousands of employees this past year, expanding
AWS infrastructure, enterprise and public sector sales capabilities
and allowing the team to innovate at an accelerating pace.

With 250 significant service and feature releases year-to-date, and
substantial price reductions for customers starting in the second
quarter (28% to 51% depending on the service), AWS continues to grow
strongly, with usage growth close to 90% year-over-year in the second
quarter.

AWS announced a new general purpose instance type for Amazon Elastic
Compute Cloud (EC2). With On Demand Instance prices starting at $0.013
per hour, the new T2 instances are the lowest-cost Amazon EC2 instance
option and are ideal for Web servers, developer environments, and
small databases.

AWS announced several new capabilities to make it easier for
developers to build, deploy, and scale mobile applications, including
Amazon Cognito for identity management and syncing, Amazon Mobile
Analytics to visualize and understand app usage data, and an AWS
Mobile SDK, which provides easy, mobile-optimized access to other AWS
services to power mobile apps that can scale from tens to hundreds of
millions of users.

AWS announced Amazon Zocalo, a fully managed, secure enterprise
storage and sharing service with strong administrative controls and
feedback capabilities that improve user productivity. With Amazon
Zocalo, customers can store, share, and gather feedback on documents,
spreadsheets, presentations, webpages, images, PDFs, or text files —
from the device of their choice.

The following forward-looking statements reflect Amazon.com’s
expectations as of July 24, 2014, and are subject to substantial
uncertainty. Our results are inherently unpredictable and may be
materially affected by many factors, such as fluctuations in foreign
exchange rates, changes in global economic conditions and consumer
spending, world events, the rate of growth of the Internet and online
commerce, and the various factors detailed below.

Third Quarter 2014 Guidance

Net sales are expected to be between $19.7 billion and $21.5 billion,
or to grow between 15% and 26% compared with third quarter 2013.

Operating loss is expected to be between $810 million and $410
million, compared to $25 million in third quarter 2013.

This guidance includes approximately $410 million for stock-based
compensation and amortization of intangible assets, and it assumes,
among other things, that no additional business acquisitions,
investments, restructurings, or legal settlements are concluded and
that there are no further revisions to stock-based compensation
estimates.

A conference call will be webcast live today at 2 p.m. PT/5 p.m. ET, and
will be available for at least three months at www.amazon.com/ir. This
call will contain forward-looking statements and other material
information regarding the Company’s financial and operating results.

These forward-looking statements are inherently difficult to predict.
Actual results could differ materially for a variety of reasons,
including, in addition to the factors discussed above, the amount that
Amazon.com invests in new business opportunities and the timing of those
investments, the mix of products sold to customers, the mix of net sales
derived from products as compared with services, the extent to which we
owe income taxes, competition, management of growth, potential
fluctuations in operating results, international growth and expansion,
the outcomes of legal proceedings and claims, fulfillment and data
center optimization, risks of inventory management, seasonality, the
degree to which the Company enters into, maintains, and develops
commercial agreements, acquisitions and strategic transactions, payments
risks, and risks of fulfillment throughput and productivity. Other risks
and uncertainties include, among others, risks related to new products,
services, and technologies, system interruptions, government regulation
and taxation, and fraud. In addition, the current global economic
climate amplifies many of these risks. More information about factors
that potentially could affect Amazon.com’s financial results is included
in Amazon.com’s filings with the Securities and Exchange Commission
(“SEC”), including its most recent Annual Report on Form 10-K and
subsequent filings.

Our investor relations website is www.amazon.com/ir and we encourage
investors to use it as a way of easily finding information about us. We
promptly make available on this website, free of charge, the reports
that we file or furnish with the SEC, corporate governance information
(including our Code of Business Conduct and Ethics), and select press
releases and social media postings.

About Amazon.com

Amazon opened on the World Wide Web in July 1995. The company is guided
by three principles: customer obsession rather than competitor focus,
passion for invention, and long-term thinking. Customer reviews, 1-Click
shopping, personalized recommendations, Prime, Fulfillment by Amazon,
AWS, Kindle Direct Publishing, Kindle, Fire phone, Fire tablets, and
Fire TV are some of the products and services pioneered by Amazon.

(1) Includes sales from non-retail activities, such as AWS sales,
which are included in the North America segment, and advertising
services and our co-branded credit card agreements, which are
included in both segments.

References to customers mean customer accounts, which are unique
e-mail addresses, established either when a customer places an order
or when a customer orders from other sellers on our websites. Customer
accounts exclude certain customers, including customers associated
with certain of our acquisitions, Amazon Payments customers, Amazon
Web Services customers, and the customers of select companies with
whom we have a technology alliance or marketing and promotional
relationship. Customers are considered active when they have placed an
order during the preceding twelve-month period.

Seller Accounts

References to sellers means seller accounts, which are established
when a seller receives an order from a customer account. Sellers are
considered active when they have received an order from a customer
during the preceding twelve-month period.

Registered Developers

References to registered developers mean cumulative registered
developer accounts, which are established when potential developers
enroll with Amazon Web Services and receive a developer access key.

Units

References to units mean physical and digital units sold (net of
returns and cancellations) by us and sellers at Amazon domains
worldwide — for example www.amazon.com, www.amazon.co.uk,
www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca,
www.amazon.cn, www.amazon.it, www.amazon.es, www.amazon.com.br,
www.amazon.in, www.amazon.com.mx, www.amazon.com.au, www.diapers.com,
www.shopbop.com and www.zappos.com — as well as Amazon-owned items
sold through non-Amazon domains. Units sold are paid units and do not
include units associated with certain acquisitions, rental businesses,
web services or advertising businesses, or Amazon gift certificates.